"There's a sucker born every minute" - P.T. Barnum
As you read this, the range of frauds being perpetrated,
range from the pensioner who is being defrauded of $10.00 by the
scammer operating the phony children's camp, to large frauds such as
the United Nations who are being defrauded of millions of dollars by
people in countries where the UN is attempting to assist that county.
No country, town or city is immune from fraudsters. No organization,
large (Enron) or small, can be excluded from the effects of fraud.
Fraud can be launched
from within an organization (e.g.: employee fraud) or can be
perpetrated from outside the organization (e.g.: supplier fraud).
Fraud can also be targeted against members of the public,
in almost unlimited ways. With the advent of e-mail, the instances of
possible fraud have grown dramatically.
Following is a copy of an e-mail received recently, which
is a version of the "Nigerian scam", one of the most prolific e-mail
frauds. Rumour has it that this type of scam accounts for a large
percentage of the country's revenue!
Click here to
read e-mail -
Click here to go to a web-site discussing the "Nigerian
Click here for
the RCMP's web-site on the "Nigerian scam"
Do a search on the WWW for "Nigerian scam"
and spend some time following the results.
of scam has been around for years - and for good reason - people still
think they are going to "earn" millions of dollars for just "letting
someone use their bank account". Of
course, what really happens is that once you give out your banking
information, you will notice that your bank balance has changed -
unfortunately, the balance will have decreased as the thieves will
attempt to clean out your bank account. Even though there have been,
and are warnings (not to mention, "common-sense") about giving out
confidential information, these scams persist because people continue
to hand out their confidential bank information to complete strangers,
simply because they received an e-mail message that will "make them
rich". Another type of e-mail scam is known as "phishing" where you
will receive an e-mail from the "security department" of a bank, credit
card company or on-line payment transfer company, stating that your
confidential information has to be updated. The perpetrator will then
give you a web link to go to to "update" your information, such as bank
account or credit card information. Unfortunately, the web site you are
sent to belongs to the fraudster who uses your confidential information
to make purchases using your money or credit. Remember that no
bank,credit card company or on-line payment centre will request such
information from you via e-mail. If you receive such an e-mail request,
simply hit the DEL key on your e-mail software to get rid of this
message and report it to your bank and local police department.
It seems that if people are presented with a plan to make
higher than usual interest rates or large sums of money for little or
no work, they will "invest" in such schemes. You usually have a better
chance of making such high returns on your investment, if you take the
cash and visit your nearest casino! One scheme that I am well aware of
was run by an "investor" who promised people a 45% return on their
investment within six months. All of those who invested are still
waiting (after 10 years) for the return of their original investment.
Unfortunately, many were retirees who took a 2nd mortgage on their home
to fund the investment and are now having a very unhappy retirement,
while the fraudster is improving his golf game in the southern US.
Of course, the "home improvement" scam has been around
for years, where a representative of a company will knock on your door
as they are "in the neighbourhood" doing work for one of your
neighbours and can give you a "deal" on some work at your house. Don't
fall for it! Don't give any company an upfront deposit for any work
before you check them out through your local BBB, Chamber of Commerce
and other such agencies. The best recommendation you can get for any
company is to talk to some of your friends who have used the same
company in the past and who have been happy with their service and
Another type of fraud perpetrated on the public is the
selling of "franchises" that promise large rewards for little effort.
One such type occurred in an Eastern Ontario city recently, where a
company was selling jewelry kiosks, that promised to make you rich. The
company would supply the kiosk, the jewelry and give you prime mall
locations to sell this "stuff" in and make your fortune. All you had to
do was send them a cheque and wait for this "priceless" opportunity to
arrive at your door. What really happened was that you "might" receive
something from the company (or maybe nothing) but usually the product
was "junk jewelry" - hardly worth the postage. What certainly happened
was that your cheque was cashed as soon as it arrived at the company.
So, you're now out some hard-earned cash (usually at least $20,000) and
you have little or nothing to show for it! Of course, you can contact
the local police department or the RCMP, but usually they are so busy
solving other larger dollar crimes that they do not have the time nor
the manpower to assist you. If you attempt to get your funds back
through legal means, you will probably find that the company has gone
bankrupt or left town. The case mentioned above is still in the Court
system, so I can't mention names, but the police are aware of millions
of dollars obtained through this scam from investors across North
America. I'm sure there are many millions more we don't know about,
simply because those who were duped are too embarrassed to come forward.
To see what does happen to the fraud artist once they are
tried and convicted, see the following March 3, 2005 article from the
Kingston Whig-Standard © HERE.
Obviously, the laws regarding sentencing for those convicted of fraud
have to be strengthened so that the punishment fits the crime.
Charity fraud has also grown in recent years, where you
are contacted (by the local police or fire association to donate funds
to assist them in sending "underprivileged" children to hockey games -
the circus or a camp. Unfortunately, the only people assisted by your
generosity to these "charities" are the perpetrators of the fraud, who
take your money. Recently, I received a telephone solicitation from
(supposedly) the local police association to help their fund-raising by
advertising in their printed program. As I was talking to the charity
"representative" (who assured me that my donation would help
underprivileged kids) I had a detective from the local police sitting
across the desk from me in the office and he assured me that this was
not a legitimate organization. As I started asking the caller pertinent
questions - "Where exactly is your office?" - "Whose the president of
the association" - he seemed to figure out that I really didn't believe
his pitch and hung up the phone. There are many worthwhile charities
out there, whose fund-raising efforts are being hurt by these scam
artists. If you receive a solicitation, check out the supposed charity
by contacting your local BBB, Chamber of Commerce or the police. Limit
your donations to "known" charities. Some fraudulent "charities" use
names very similar to well-known, honest charities - so be careful who
you are handing your money over to.
The Canada Revenue Agency (CRA) maintains a listing of
Canadian "charities" whose registration has been revoked. They also
maintain a repository of charitable financial information filed
annually by charities, whose registration is still valid. Click HERE to go to
their web site.Click HERE for copies of articles published in the
Toronto Star showing some of the larger charity frauds uncovered by
Remember- you worked for your money. Don't give it away to scam artists!
Anyone who knows basic accounting and auditing, is aware of the phrase
"separation of duties". This refers to the fact that no one employee
should be left in a position to both perpetrate errors and to conceal
errors or irregularities in the normal course of his\her duties. An
example - the person who has control over the company cheques may
decide to give themselves an "unauthorized raise" by stealing a company
cheque and forging the signature of a signing officer. If that same
employee is in charge of maintaining the company's cheque register and
doing the bank reconciliation, he may be able to suppress the recording
of the fraudulent cheques and prevent the discovery of the fraud which
would normally be uncovered through the bank reconciliation. Control of
such irregularities involves eliminating the opportunity for
concealment - by assigning the bank reconciliation duties to another
employee. Obviously, collusion between the two employees would
circumvent this control. There have been some really "dumb" frauds
carried out by employees, which are discovered fairly quickly - because
of basic controls, such as the separation of duties. The smaller the
company, the more management has to oversee the basic functions, such
as reviewing expense invoices before signing cheques, reviewing the
number and amounts of the payroll cheques to ensure that all cheques
are going to actual employees and that the amounts being paid are
reasonable, reviewing the monthly listing of customer accounts
receivable to ensure that cheques received for payment of these
accounts are being credited to the bank of the corporation and to the
correct customer accounts and, reviewing purchases made on corporate
credit cards to ensure they are for the benefit of the company. These
do not have to be done monthly but should be carried out fairly often
and on a random basis.
Every business should have a corporate fraud policy, and
that policy should be mandatory reading for all employees. The policy
should be posted for all staff to see. Of course, management should
practice what it preaches. There is not much sense in having a fraud
policy for employees when management cheats by expensing personal items
through the company and "laughs off" the whole idea. Management must
set an example. Retain a knowledgeable fraud consultant to assist your
company in drafting its fraud policy. If an employee is caught having
committed a fraud against the organization, then prosecute that
individual! If you don't, other employees will see that there are
little or no consequences for their fraudulent actions against the
Large corporate frauds such as Enron, Worldcom and others
are started and carried out by senior management, who have the control
to conceal these schemes from the owners or directors and the external
accountants or auditors. These are obviously more difficult to detect,
but as the management of the above companies now know, they are not
impossible to detect.
Almost every corporate fraud perpetrated by employees
will succeed for a period of time because the proper accounting
controls are either not in place or are being circumvented. A thorough
analysis by a qualified accountant (CA in Canada; CPA in the United
States) will ensure that the controls are adequate and functioning.
qualified accountant with experience in fraud investigations to ensure
that your company has an adequate fraud policy and the necessary
controls in place to reduce the chances of your organization being the
victim of fraudulent activities.